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Europe providing more than €112 billion a year in fossil fuel subsidies, with almost half benefiting the transport sector – new report

28 September 2017

European governments and the EU are handing out more than €112 billion each year to prop up the production and consumption of fossil fuels, despite a pledge to phase out harmful subsidies by 2020.

A new report by the Overseas Development Institute and Climate Action Network (CAN) Europe has for the first time gathered detailed information on the support provided to fossil fuels such as oil, gas and coal from 11 European countries and the EU between 2014 and 2016.

Experts found the transport sector was the main beneficiary, with more than €49bn used to support the use of fossil fuels, including tax breaks to reduce the price of diesel. Overall, the transport sector received 44% of the total government support identified.

Researchers warn that these tax breaks continue to encourage the use of diesel, at a time when the costs to health from air pollution have become more apparent. This also discourages the switch to low-carbon transport, including electric vehicles.

Shelagh Whitley, Head of Climate and Energy at ODI, said: 'The air pollution crisis in cities across Europe and the recent diesel emissions testing scandal have rightly led to increased pressure for governments to act, yet our analysis shows European countries are providing enormous fossil fuel subsidies to the transport sector.

'This study shows how governments in Europe and the EU continue to subsidise and finance a reliance on oil, gas and coal, fuelling dangerous climate change and air pollution with tax-payers' money.'

The report, Phase-Out 2020: Monitoring Europe’s fossil fuel subsidies, also found that every year between 2014-2016, the EU provided an annual average of €4bn in fossil fuel subsidies through its budget, development and investment banks and funds. The growing support for gas, and the continued provision of support for coal-fired power, are particularly concerning.

The findings come despite European governments and the EU pledging to phase out fossil fuel subsidies by 2020 and committing to phase out emissions from fossil fuels by the second half of this century as part of the Paris Agreement.

Wendel Trio, director of CAN Europe, said: 'The €4bn spent by the EU on fossil fuels, most of which goes to gas infrastructure, locks Europe into fossil fuel dependency for the decades to come. This violates the Paris Agreement’s requirement to make finances work for the climate.

'In addition, the fact that over €2bn a year is provided by EU Member States to support coal-fired power, the dirtiest of all fossil fuels, is unacceptable.

'The EU must stop subsidising fossil fuels. Instead, the scarce resources of the EU budget and the EU’s development and investment banks should serve higher climate ambitions by financing the clean and sustainable energy transition.'

Other findings include:

After transport, industry and business received the most government support, benefitting from just less than €15bn per year

Subsidies continue to be provided for fossil fuel exploration, with the UK and France providing €253 million per year in public finance between 2014-16 on finding new resources

The report makes a series of recommendations urging European governments and EU institutions to:

Lead the G7 and G20 by meeting their commitment to phase-out fossil fuel subsidies by 2020

Increase transparency through a publicly-disclosed and consistent annual reporting scheme

Ensure mechanisms supporting energy transition do not support fossil fuel production and consumption

Target any remaining subsidies to supporting workers and communities to move away from fossil fuels

ENDS

Notes to editors

There is a European Union (EU) level commitment that Members States must phase out environmentally harmful subsidies (including those to fossil fuels) by 2020. European governments have made parallel pledges to end fossil fuel subsidies under the G7 and the G20.

The report tracks fossil fuel production and consumption subsidies referencing the World Trade Organization’s (WTO) definition of a subsidy which includes: fiscal support, such as direct spending by governments, tax breaks and income or price support; domestic, regional (EU) and international public finance through grants, loans, equity and guarantees; and investment by state-owned enterprises

The report looks at support to the consumption and production of fossil fuels by 11 countries – Czech Republic, France, Germany, Greece, Hungary, Italy, Netherlands, Poland, Spain, Sweden and the UK – and by the EU itself including the EU budget, the European Investment Bank (EIB), the European Fund for Strategic Investments (EFSI), the European Bank for Reconstruction and Development (EBRD), per year in between 2014 and 2016

Based on the CAIT Climate Data Explorer (http://cait.wri.org/) the 11 European countries reviewed were responsible for 83% of Europe’s energy related greenhouse gas emissions in 2013

According to two recent reports by Transport and Environment, diesel fuel was taxed, on average, 14 per cent less than petrol in 2014 (Europe’s tax deals for diesel); and diesel cars have higher impacts over their lifecycle than petrol cars, in terms of air pollutants (nitrogen oxides and particulates) and carbon dioxide (Diesel the true (dirty) story)

For more information or to arrange an interview with one of the researchers please contact James Rush on [email protected] or +44 (0)7808 791265